Taxing second homes

Earlier this month (May 2016) the residents of St Ives in Cornwall voted overwhelmingly to restrict the purchase of new build homes to those who can prove they intend to live in the property for more than six months in any year. It’s a move which is already under consideration by other areas of the country which have seen property prices soar in recent years thanks to multiple home ownership.

It’s also another potential nail in the coffin of those who are looking to buy second homes, either for their own use or to rent out to others. The cost of buying a second home increased on 1 April 2016 when higher stamp duty land tax rates for second and buy to let homes came into force. This change will potentially hit many who already have a home, either in the UK or abroad; including joint purchasers where one already owns a property.  The Government consultation covers many common scenarios but there is ongoing discussion about some of the more complex scenarios so it is worth taking advice in advance of any purchase decision.

Adding to the complexity is the change to tax relief on buy to let mortgage interest payments which is being phased in from April 2017. Together these changes leave those thinking of entering the buy to let market or who already have property portfolios needing to rethink their finance model. This was highlighted in the last week by the fact that Barclays has followed the Nationwide in upping its minimum rental cover requirement for landlords to 145%.

If you would like to speak to a tax adviser about taxation in respect of additional properties, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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SME opportunities

It can be tough running an SME business. You may be smaller and more flexible than some monoliths which been around for decades but you still have to cover all of the day-to-day business operations without the support infrastructure which a larger business can bring. HR, IT, marketing and social media; those working in SMEs may well have to wear many hats or call for external expertise.

Perhaps that’s why a recent report from online freelance company People per Hour reveals that nearly two thirds of SMEs now call on freelancers to fill positions such as design and software, marketing and social media. In a way this is a logical extension of the standard practice in business to appoint external professionals such as solicitors, accountants and tax advisers who can bring their expertise to bear on helping SMEs to finalise their accounts and maximise their tax opportunities.

But whilst SMEs face many challenges, there are also many opportunities available. For example, Innovate UK has recently announced a competition to identify innovation projects in manufacturing and/or materials. With a closing date of 6th July, Innovate UK is looking to invest up to £15 million on relevant projects that lead to increased UK SME productivity, and growth. With SMEs being the beneficiaries of this competition, all entrants need to be either SMEs or a conglomeration of businesses which includes at least one SME.

If you would like to speak to a tax adviser about SME taxation, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Taxing inherited pensions

Amid all the talk of Panama papers and offshore tax havens, it can be easy to lose sight of the fact that when it comes to taxation there are some things which should be taxed and some which shouldn’t. Understanding the rules can therefore help people to avoid falling into the overpayment trap in which tax is taken when it need not be.

One such example in respect of inherited retirement funds came to light recently. With effect from 6 April 2016, those dying before the age of 75 can pass certain types of pension pots on to inheritors free of income tax. Tax is payable on such transfers for those dying after the age of 75. However, an investigation has revealed that in some circumstances, where the pension company has provided HMRC with details of the transfer in accordance with normal procedures, HMRC has raised a tax demand.

At the time of writing information in respect of the number of those affected is unclear but pension providers have been ordered to stop providing information in respect of death benefits to HMRC until the problem has been resolved. The danger of issues such as this arising is that those who are grieving may be all too ready simply to accept the tax bill rather than investigate the regulations and this could affect their own income tax and investment decisions.

If you would like to speak to a tax adviser about inheritance tax, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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SME tax benefits

Calling all SMEs and micro businesses; are you fully aware of the tax reliefs which are available to you? If you’re not then you aren’t alone. A survey carried out on behalf of Direct Line for Business has revealed that nearly half of UK SMEs have a very poor understanding of tax reliefs which may be available for their business and 66% don’t know if they are eligible for the reliefs which are available.

Tax breaks on offer include entrepreneurs relief, enterprise zone relief, capital allowances, corporation tax marginal relief and small business rate relief. When you add in other measures such as the recent change to the treatment of dividends it’s not surprising that according to Direct Line for Business some 3.5 million SMEs could be missing out on tax reliefs amounting to millions of pounds.

Commenting on the findings Nick Breton, head of Direct Line for Business said he would encourage SMEs “to do some research and seek help if necessary to make sure they are taking full advantage of the benefits.”

If you would like to speak to a tax adviser about taxation for SMEs, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Charity Bequests

If you have ever considered leaving money to charity in your will then you are not alone. New research by Smee & Ford has revealed that some 15% of wills include a charitable bequest and that this figure is on the rise. Given the time taken to finalise probate, figures for 2015 not yet available; however the research did reveal that in 2014 some £2.2 billion was left to charity, a rise of 8% on the previous year.

Those considering leaving a legacy donation may not be aware that such sums are deducted from the estate before the calculation of inheritance tax.  In addition if more than 10% of the estate is left to charity then not only is the bequest deducted before inheritance tax is calculated, the remainder of the estate is also subject to a reduced inheritance tax rate.

This means that potential charity bequests should be taken into consideration when looking at inheritance tax planning. However, if the sole consideration is to make a donation to charity and the donor is a taxpayer, it may be more beneficial to simply gift aid a donation rather than leaving it as a bequest in your will.

If you would like to speak to a tax adviser about inheritance tax planning and the implications of charity bequests, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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SME Tax – Every penny counts

Calling all small businesses, freelancers and consultants: how vigorously do you calculate your expenses claims? No I’m not talking about over-claiming; quite the contrary, I’m talking here about all those small expenses which many of you seemingly don’t even bother to put on your expenses forms.

Research amongst micro businesses, freelancers and sole traders by accounting software provider FreeAgent has revealed that only 39% claim all allowable expenses, with 20% not bothering to claim any expenses. Across the survey the main ‘culprit’ seems to be those expenses which come in at under £10 and are therefore seen as not worth claiming back.

However, if these findings were extrapolated across the small business economy it would amount to some £250 million worth of unclaimed expenses, equivalent to unclaimed tax relief of some £50 million (assuming basic tax rate only). The headlines at the moment may be very much at the other end of the tax spectrum, but if the U.K.’s smaller businesses are the backbone of the economy, they cannot afford to simply hand money over to the Treasury unnecessarily.

If you would like to speak to a tax adviser about taxation for smaller businesses and freelancers, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Tax changes hit gift aid

In our March article ‘Use it or lose it’ we commented about the way in which changes in the 2016/17 tax year could affect gift aid. This is such an important subject, particularly for charities and for those who make regular donations, that it deserves an article on its own.

Let’s start by looking at the tax changes which could potentially affect gift aid donations:

  • Personal allowance increase to £11,000.
  • A new dividend tax allowance of £5000 above which basic rate taxpayers will pay 7.5% on dividends, higher-rate taxpayers 32.5% and additional-rate taxpayers 38.1%.
  • A new personal savings allowance of £1000 for basic rate taxpayers and £500 for higher rate taxpayers.

In theory this means that an individual could have income of £17,000 and pay no tax at all. As a result, they would be unable to gift aid any donations which they make to charitable organisations. Should they continue to make a gift aid declaration then the tax authorities are likely to pursue them for payment as well as reclaiming the over-payment from charities themselves.

In order to avoid this scenario, charities should be looking to:

  • change the wording on any gift aid donation forms,
  • update their advice on gift aid on their websites and other publications,
  • give appropriate training to their employees and volunteers,
  • identify ongoing donations with a view to checking the tax status with donors.

If you would like to speak to a tax adviser about the implications of new taxation rules in respect of your tax position, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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5 Star Review for Newshams Tax Advisers

We love exceeding our clients’ expectations and really appreciate the reviews and testimonials from our delighted clients.

Our good friend Kamal Harris at Division 1 Marketing (http://division1marketing.com/) / kamal@division1marketing.com has kindly put together an amazing testimonial video which you can check out below:

We look forward to helping you with your tax planning needs and exceeding your expectations!

Call Newshams Tax Advisers today on 0800 211 8657!

 

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The Panama effect

There is a fine line between legitimate tax planning and tax evasion. In fact, over the last few years it could be said that the line is becoming ever thinner as governmental and public pressure encourage individuals and organisations not simply to obey the letter of the tax law but add a moral layer to their tax planning regimes. As a result of this applied pressure, helped in part by changes in legislation, we’ve seen in recent times some multinationals start to move away from utilising every avenue of cross-border tax available to them.

Against this backdrop the ‘Panama papers’ have added fresh impetus to the tax debate. Originating from a Panamanian law firm it is alleged that some 11 million documents which purport to show money laundering and tax avoidance schemes have been leaked to a German newspaper. Reportedly the individuals and organisations affected span the globe with national authorities in a number of countries opening investigations.

What the outcome of these investigations will be is a matter for the future and no doubt action will be taken either to strengthen international or national tax legislation should the outcome warrant it. In the meantime, for the vast majority of ordinary individuals and small businesses which are able to benefit from the legitimate tax planning measures which have been introduced by Government, life goes on as before.

If you would like to speak to a tax adviser about tax planning, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Use it or lose it

For many in 2016 the return from the Easter break characterises one thing; the fast-approaching end of the tax year.  As in previous years, those who are in position to make the most of their annual ISA allowance but have not yet done so are taking action to use their allowance before they lose it at the end of the tax year.

However, with some significant changes coming in from the start of the next tax year, there is added incentive for people to ensure that they have maximise their tax position in the current year. For example changes to pension scheme rules, particularly for higher earners with the tapering of annual relief and the reduction in the lifetime allowance, could result in some significant and unexpected tax bills in future years unless action is taken now to mitigate those changes.

At the other end of the spectrum changes to personal allowances and the taxation of dividends and bank interest could affect ongoing gift aid payments as donors cease to have any tax liability. We’ll cover this in more detail in a future article but in the meantime those who believe they are likely to be affected by the change and had been meaning to make a charitable donation may find it worthwhile to do so now rather than wait until next tax year.

If you would like to speak to a tax adviser about the implications of new taxation rules in respect of your tax position, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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